US Stocks Climb, Boosted By Construction, Manufacturing Data

DonnaKardos

NEW YORK (MarketWatch) -- A surprisingly strong round of U.S. construction and manufacturing data bolstered U.S. stocks Tuesday, encouraging investors about the domestic economy despite worries over global growth.

But energy stocks fell sharply and limited the broader market's gains following BP's failed attempt to plug the worst oil spill in U.S. waters.

The market swung from losses to gains in the morning, as it took its cues in part from manufacturing data. U.S. stocks had opened lower on worries about overseas economies after two gauges of Chinese manufacturing showed slowing growth and the European Central Bank reported on the write-downs facing euro-zone banks. Those declines were erased following the domestic data, which included a stronger-than-expected rise in U.S. manufacturing activity and the biggest gain in monthly construction spending in almost a decade.

"We have very clear investor concern for Europe and deep uncertainty as to how that may affect other global economies and specifically our recovery. But balancing that, we are continuing to get a stream of domestic economic news that shows as of now the U.S. recovery is deeply entrenched and on a positive track," said Elizabeth Miller, president of Summit Place Financial Advisors.

Miller added, "the third piece of the stool is we've had the worst May in history, so professional investors in particular are looking at valuations and economic news domestically and saying there are some long-term buying opportunities in this market."

The Dow Jones Industrial Average was up 8 points, or 0.8%, to 10145, in recent trading. Earlier in the session, the measure had been down as much as 98 points. Among the measure's recent top performers, Kraft Foods rose 1% after the company said Cadbury PLC chief strategy officer Mark Reckitt will leave as integration efforts continue since the two companies merged earlier this year. Microsoft gained 0.7% after Asustek Computer, a Taiwan-based company, unveiled the Eee Pad, a tablet computer that will run on Microsoft software.

The Dow's financial components kept its gains in check as worries over the potential impact of write-downs at euro-zone banks weighed. American Express dropped 1.4%, while J.P. Morgan Chase declined 1% and Bank of America slipped 0.3%.

The Nasdaq Composite fell 0.3%. The Standard & Poor's 500-share index was down 0.5%, flitting between small gains and small declines, as its technology and consumer sectors climbed but the slumping energy sector offset those gains.

The energy sector's tumble came as BP's highly anticipated "top-kill" operation failed to stanch the Gulf of Mexico oil spill. BP said it is now working on deploying a so-called lower marine riser package containment system. American depositary shares of BP dropped 11%. Shares of other companies with direct connections to the rig fell, with Transocean down 7.7% and Cameron International off 5.9%.

Among the U.S. economic data that boosted the broader market Tuesday, U.S. construction spending rose 2.7% in April from the prior month, to a seasonally adjusted annual rate of $869.09 billion, according to the Commerce Department. Economists had expected no change. The increase in April was the highest since August 2000.

In addition, the Institute for Supply Management reported Tuesday that its May manufacturing index moved to a reading of 59.7, better than the 58.7 expected by economists.

The dollar strengthened against the euro following a European Central Bank report warning that euro-zone banks face 195 billion ($240 billion) of write-downs this year and next. Also reigniting global demand concerns, two gauges of Chinese manufacturing showed slowing growth.

But the U.S. Dollar Index, which reflects the U.S. currency against a basket of others, was down 0.3% recently. Meanwhile, Treasurys edged up, pushing the yield on the 10-year note down to 3.30%. Gold futures also gained, while crude-oil futures rose above $74 a barrel.

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